Technology as a Profit Center

The automotive industry will see more than 370 million software systems used to integrate smartphone applications in vehicles in-use by 2020, according to a recent report from IHS Automotive.

And what’s more, those features are becoming increasingly important to consumers. According to the J.D. Power 2014 U.S. Automotive Emerging Technologies Study, the majority of vehicle owners are willing to pay for smartphone functionality.

Among vehicle owners who say they “definitely would” or “probably would” purchase specific technologies on their next vehicle, the highest percentage selected fuel economy, device/application linking for smartphones, wireless connectivity, natural language voice activation and infotainment features. In older vehicles, retrofitting is becoming a popular option, as well.

“The fact of the matter is, the days of letting the quality of the vehicle and the weather do our marketing are quickly coming to an end,” says Rick White, president of One Eighty Business Solutions and an industry consultant. “Because we don’t have those repairs, there are a lot of shops scrambling for car count. One of the ways they can supplement that car count is to add technology add-ons.”

Using technology as an additional profit center can be a way to differentiate your shop from the competition and get ahead of the curve. Working with various “add-ons” to vehicles can give business a boost, too. Installing and fixing GPS and entertainment systems and other electronic services can turn into a successful profit center for business.

Before doing so, however, there are a few considerations to keep in mind, including how to stay up on the technology, what technology to look into and how to properly equip and train your staff to handle all of the technology that a vehicle has today.

The Benefits

Technology add-ons may not be the top moneymaker in your shop yet, but they will lead to new customer generation, says Josh Mellor, owner of Mellor’s Automotive in West Melbourne, Fla. Mellor was one of the first in his area to work on these jobs and has created an additional profit center by working on these types of services and repairs.

There are a number of benefits to adding new technology services to your shop:

1. Planning for the future. IHS Automotive reported that smartphone app systems are currently at 6.9 million units in 2014, with expected growth to 370 million units by 2020. The number of OEM-installed connected car infotainment systems will reach 34.2 million units shipped worldwide by the end of 2018, according to ABI Research forecasts.

Apple CEO Tim Cook also recently said that every major car brand has now committed to using CarPlay.

The bottom line is that these technologies are significant.

“Mobile apps for autos are growing rapidly and will have a profound impact on auto infotainment and connectivity in the next decade,” says Egil Juliussen, research director at IHS Automotive. “Auto apps will influence the competitive landscape among auto manufacturers and will even change the brand market share between them. OEMs will have to keep up to remain competitive.”

2. Customer demographics. Millennials topped Generation X in new-car buying for the first time last year. And it’s no secret that the millennial generation will soon become your shop’s dominant demographic. One way to appeal to millennials is through new technology, White says. According to a study conducted by Yahoo, the majority of millennials want cars with new technology like Bluetooth and infotainment systems.

3. It’s new business. Mellor says that if you’re not working on these types of services, you’re giving away work and turning away potential new clients. He says his shop has gained new customers due to being one of the only independent shops able to perform these services.

“When you talk about programming and software and that avenue, there’s huge potential there,” he says. “As far as being a profit center, it saves you from having to tow a car across town to be programmed after you installed a computer or module. We’ve gotten new customers from the parts houses. Say a Carquest [store] sells someone an engine-control module and they send them to us. That customer probably already has a shop, but their shop wasn’t equipped to do it. We’ve won some of those customers because we were technical and qualified enough to do what needs to be done.”

What You Need

While there is some investment, training and time needed to be able to perform these services, White and Mellor agree that it is fairly minimal.

Grasp on customer base. There are a number of different add-ons that could be tapped into, so White says the first step needs to be identifying the needs of your target customer.

“I like focus and clarity. It’s the difference between being a light bulb and a laser,” he says. “I want to offer services that my customer will eat up.”

For example, he says that if the majority of your vehicles are older, consider getting into retrofitting. If many of your customers are parents, installing rearview cameras could be a helpful add-on. Consider how you could help make a customer’s vehicle more convenient.

Mellor says that he looks at what’s interesting to him, his tech’s capabilities and his customer’s needs.

“There’s not a lot of shops going after this kind of market right now,” says White. “It’s really wide open. There’s a bunch of convenience and safety items that you can use or offer your customer.”

Training. This is where the biggest investment needs to be made.

“There’s a disparity between qualified technicians and what the independent shops need,” Mellor says. “A lot of times, the dealership-level techs have the training. I know some other shop owners and I come from the technician side, there’s weakness when it comes to the technology side of things.”

Mellor says that there is ample training available for technicians to learn programming, how to read wiring diagrams and perform these installations. And, he says, the learning curve isn’t terribly steep.

“Given the skillset most techs have when it comes to technology, it’s not anything spectacular that you have to do to install a navigation unit,” he says. “It’s a little above installing a regular car stereo.”

Tools. The nice thing is, Mellor says, a fully operational shop already has most of the equipment it needs to work on these add-ons. The only item essential to this kind of work is a J2534 tool. Mellor says that the generic J2534 has improved dramatically recently and is easier to use. On the software side, he says it’s not necessary to buy an annual subscription for the manufacturer information.

“We don’t do enough of any one make to buy the subscription for the whole year,” he says. “We simply buy it as needed and it’s billed accordingly. Every manufacturer is different. For a GM, it’s a $55 subscription for three days. For Volkswagen, it’s $30.”

White says this is where the training is especially important and why it’s important not to use menu pricing and instead price on value.

“It has to be specific to the vehicle,” he says. “The reality is, we compete on value, not on price. do you want someone who’s not trained? Or would you rather have someone who’s a certified master tech putting this stuff into your car? That’s the big part. If you’re going to worry about price, it’s a race to the bottom.”

Marketing. It makes no sense to perform these services and not let your customers know it is an option for their vehicles, White says. He suggests shifting a portion of your current marketing budget toward this aspect of your business to get the word out and position yourself as an expert, which will help attract customers.

“The trend is that more and more people will have these,” he says. “It’s just a matter of a few years before that stuff is going to come to you anyway and you start seeing it. It’s going to be out there and how long can you tell someone that you can’t work on that? It kills me. I can’t stand to tell anyone that.”

Anna Zeck is the managing editor at 10 Missions Media, where she writes content for Fixed Ops Business and oversees content creation for FenderBender and Ratchet+Wrench magazines.